Saturday, October 20, 2012

25-years ago on October 19, 1987 - the stock market had its largest single day decline ever. Prior to this crash, Elaine Garzarelli’s claim to fame was predicting that calamitous event.
Five years ago, on the 20th anniversary back in 2007, and eerily similar to the 200-pt. decline this year, CNBC was taping an interview with her amid the largest one-day decline (366-pts) in months and within 6-days of the 2007 market top prior to the two-year crash.

Garzarelli was bullish, touting that the market was still in the midst of a secular bull market. At the time, just one week after the top of the 2007 bull market and smitten by the power of the Fed, she maintained stocks were undervalued and had more upside potential basis her indicators.
In her defense, she did stress that $125 crude oil would throw a wrench in the gears and bring about a recession however, she further postulated that she thought Oil was at a peak and would be moving lower not higher. At the time, Oil was trading near its all time highs in the 90-dollar range.
Even the irreplaceable Mark Haines could not believe that $125 oil was plausible. Exactly 38-Fibonacci weeks later, Oil peaked at $147 the week of July 11, 2008. By that time, the Dow had yet to reach its 2009 bear market bottom, but had already lost more than 3000 pts from its all time 2007 high of 14,198.10, which remains unchallenged to date. Here is the CNBC clip from 2007:

Amidst a Fed-induced bailout rally, which was nudging the Dow back toward 13,000 from a March 2009 low of 6,470, in her most recent Fox News interview in January of 2012, Ms. Garzarelli appeared to possess a renewed sense of bullishness, and stated that the Dow could hit 15,000 by 2014.

Given the fundamental truths surrounding a flawed global monetary policy of fiat currencies, and the unsustainable debt-based structure of industrial economies as a whole, it is truly hard to fathom that the Dow and S&P have continued to run-up within a stone’s throw of their all time historic highs.
Before we get into the BIG Silver Lining that is presenting itself right now, we would like to take the balance of part-I to share some smaller positive aspects in illustrating how the Chart-Cast Pilot has been faring against the price action across the entire financial sphere.

Below are the latest performance stats for the broad market portfolio of the Chart-Cast Pilot.

Playing the S&P like a Fiddle:
Mid-month we moved long S&P futures from 1431.75, and booked $925 per contract as we reversed short just in time for today’s big decline. Prior to getting our bearish email alert, we had provided an additional heads up for Pilot members by illustrating a 12-pt. sell trigger trajectory, which went on to capture its downside price target at 1436.40. Riding the Short-Term Fear of Deflation in Gold:
Shortly following the Fed’s announcement of perpetual QE, values in all financial markets rose sharply, reflecting assured additional losses in purchasing power across global fiat currencies, namely the world reserve US dollar fiat.
The chart below illustrates the reaction in gold on the day of the QE-to-infinity announcement by the Fed. We were already long from 1615, and had an additional heads-up 15-pt. buy-trigger in place, which handily captured its target at 1679.

As represented below by our daily account balance on September 14, equity in this gold trade peaked at just under $16,000 profit per contract.

After a robust seasonal run-up in the gold trade from the August lows in concert with the prospects of never-ending QE, gold marked a crest in early October just shy of $1800 per ounce.
Shortly thereafter, we cited a 24-pt. sell trigger, which eventually went on to capturing its downside price target at 1741. In addition, after giving back $1840 in recent profits on a losing trade, we moved short on October 12 from 1754.10.
We also recently provided an additional line in the sand just north of 1750, and cited an additional 27-pts of downside to the 1724 target if price breached that line. We captured that target amid today’s sell off.

This week’s Google Debacle:
Below are the current performance stats for the individual stock portfolio of the Chart-Cast Pilot. Until today, the Pilot was long Google in all three timeframes.
Although we remain long Google in Mid-Level trading accounts, the chart below illustrates a clear heads-up advance given to the bulls that were trading in this period. The day before the untimely release of disappointing earnings, we had cited 36-pts of downside risk upon breach of the rising trendline noted.
Upon the news, we easily captured the downside price target of 709. We still have some rather robust upside price targets for Google. We list them below at 855 and 1024. These bullish price targets shall remain defended so long as Google maintains closes above the shared trendline trajectory that supports each of the green up arrows.
Also obvious is our long entry at 600.48 on July 23rd along with two previous upside price target captures at 608 and 688.
In closing part-I, we will leave you with a couple of takeaway’s. The first is that the market can be sentimental at times, in that it occasionally pays attention to major anniversaries. The second takeaway is to take fundamental indicators as those espoused by Ms. Garzarelli with a grain of salt.
Though such arguments may appear sound or perhaps may have worked in the past, they are by no means a substitute for the vigilant observation of price itself and a proven strategic system of engagement by which to trade and exploit it.
Stay tuned for Part-II.